Television Advertising and Soda Demand

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Lopez, Rigoberto A. ; Liu, Yizao ; Zhu, Chen (2012)
  • Subject: advertising, demand, competition, consumer behavior, sodas, carbonated soft drinks, Demand and Price Analysis, Industrial Organization, Marketing, D12, L66, Q18, I18,
    mesheuropmc: health care economics and organizations

This study examines the effects of television advertising on consumer demand for carbonated soft drinks using a random coefficients logit model (BLP) with household and advertising data from seven U.S. cities over a three year period. We find that advertising decreases the price elasticity of demand, indicating that advertising plays predominantly a persuasive, therefore anti-competitive role in this market. Further results show that brand spillover effects are significant and that measuring advertising with gross rating points (GRPs) outperforms measuring it with expenditures, as is conventionally done. Finally, simulation results indicate that eliminating all television advertising would lower market shares of sodas as consumers migrate to other beverages such as juices, water and milk
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